Exploring the Foundations of Consumption Theory of Institutional Economics: a View on Veblen's Ideas

Consumption is one of the most important issues in economics. According to this fact, the present paper is devoted to this topic. Indeed the main questions to be addressed are: what dimensions of reality is covered by conventional theory of consumption? Which postulates are the main ones in this conventional theory? Has institutionalism presented a more comprehensive theory of consumption? In other words, can institutional economics theory of consumption, or more specifically, Veblen theory of consumption, provide a better explanation of reality?In this paper we will demonstrate that, from early stages of its evolution, utility theory of consumption was encountered with serious challenges. This theory is based on some psychological principles that disconnected the connection between consumption and other issues. In contrast, it will be demonstrated that the theory of institutional economics, which is based on Veblen theory of leisure class, do provide a better explanation of consumption and some very related issues, such as poverty.